Eastern’s coal success dents Solid Energy ’s dominance

A shock for state-owned collier Solid Energy has come from its loss of the coal supply contract for Fonterra’s giant Clandeboye dairy factory near Timaru to Australian start-up Eastern Coal Supplies.

The loss of the 130,000 tonnes a year contract will affect five Solid Energy and 30 sub-contractors’ jobs when bulk stripping operations cease at the collier’s Ohai mine in Southland in August this year. The opencast mine is expected to close sometime between 2009 and 2012, company spokeswoman Vicki Blythe said.

Eastern, a wholly owned subsidiary of Queensland coal and energy company Eastern Corporation Pty, takes over the Clandeboye contract for two years from September this year, and will supply the coal from its Takitimu mine between Ohai and Nightcaps.

Eastern’s success puts a dent in Solid Energy’s dominance of the South Island coal trade, with Ms Blythe admitting she couldn’t remember the last time it lost a major contract there.

“It did come as a surprise to people, including some of us. We’re always conscious we have to be competitive but the bottom line is that on this occasion we weren’t,” she said.

Eastern Corporation was formed in 2003 to develop a coal project in Queensland’s Bowen Basin under chairman Gordon Smith who had extensive mining experience in the area. Mr Smith died last week after an illness, but it was he who drove the company to expand into New Zealand where it has so far invested $10 million.

Its first purchase, in 2004, was of the Whareatea West exploration permit on the Denniston Plateau north of Westport, which has measured and indicated resources of high-grade coking and thermal coals totalling 25.7 million tonnes.

“Eastern’s aim is to establish itself as a significant coal producer in New Zealand,” the company’s New Zealand general manager, Campbell Smith said.

Source: Hugh de Lacy - The National Business Review, 5th April 2007